UK Retail Sales Rise 0.7% in March

UK drivers' dash for fuel at start of Iran war boosts retail sales

Impact of Iran War on UK Retail and Fuel Sales

By William Schomberg

Surge in Fuel Sales Following Conflict Outbreak

LONDON, April 24 (Reuters) - British motorists worried about fuel price increases rushed to the pumps immediately after the start of the Iran war, pushing up total sales volumes for the country's retail sector by more than expected in March, official data showed on Friday.

Fuel sales leapt by 6.1% from February with much stronger sales than usual in the first few days after the start of the conflict on February 28, the Office for National Statistics said, using government data.

Historical Context of Fuel Sales

Excluding the COVID-19 pandemic period, it was the biggest monthly increase in fuel sales since January 2016, the ONS said.

Broader Retail Sales Trends

Retail sales volumes across the board rose by 0.7% in March after a fall of 0.6% in February.

Economists polled by Reuters had mostly expected a monthly increase of 0.1% in sales volumes in March.

Excluding fuel sales, volumes were up by 0.2%, the ONS said. The Reuters poll had pointed to a flat reading.

Consumer Response to the War

Overall, the data suggested consumers did not immediately rein in their spending in response to the war. Clothing sales were up by 1.2% from February as a wet start to the year gave way to sunshine in March.

Food and Clothing Sales Performance

However, food sales fell by a monthly 0.8%, the biggest drop since August last year.

Outlook and Retailer Sentiment

Thomas Pugh, chief UK economist at accountancy firm RSM, said a fall in consumer confidence in April suggested that the war will have a bigger effect on sales this month.

"The longer the crisis goes on for, the more likely consumers are to adjust their spending habits, as consumer confidence wanes. That sets a much tougher outlook for retailers than we were considering before the war," Pugh said.

Consumer Confidence and Retailer Statements

On Thursday, Britain's longest-running consumer sentiment index published by market research firm GfK fell to its lowest since October 2023 in March and suffered the biggest drop from one month to the next in a year.

Major British retailers have said uncertainty over the impact of the Iran war on shoppers is clouding their outlook and could hurt profits.

Food retailers, including Tesco and Sainsbury's, have said they are yet to see meaningful changes in consumer behaviour. But clothing chain Primark said that while March trading was encouraging, April has so far been soft.

Government Revenue and Fuel Duty

Friday's data showing the rise in fuel sales volumes in early March - which contributed to a nearly 12% rise in fuel sales by value in the month - came a day after the ONS said government tax revenue from fuel duty - which is set at a fixed level - fell to its lowest for any month since July 2023.

How Fuel Duty Works

Fuel duty is paid to the government when fuel leaves refineries, coastal terminals or approved warehouses.

(Additional reporting by James DaveyWriting by William SchombergEditing by William James, Peter Graff)